How Your Credit Score Affects Your Interest Rate

October 27 2010 (Shirley Allen)

A¬†survey of 25,000 loan quotes and requests by Zillow Mortgage Marketplace during the first half of September found borrowers were unlikely to receive even one loan quote if they had a credit score of below 620 — even if they offered to make large downpayments of 15 to 25 percent and that most Americans have credit scores that are too low to qualify for the best rates on a mortgage loan.

The chart below breaks down the data that was obtained by Zillow:

FICO Score Percent of Americans in this category Non-FHA average annual percentage rate (APR)
Below 620 29.3% N/A
620-639 3.7% 4.9%
640-659 4.3% 4.73%
660-679 4.6% 4.6%
680-699 5.1% 4.56%
700-719 6.1% 4.44%
720 and up 47% 4.3%

Source: Zillow and Fair Isaac Corp.

According to Fair Isaac Corp., the creator of the FICO algorithm used by credit reporting agencies to calculate FICO scores, 29.3 percent of Americans have credit scores below 620.

About 47 percent have scores above 720, which would placed them in the group that Zillow’s analysis found was likely to get the best mortgage rates.

The best annual percentage rate quoted by loan originators on Zillow Mortgage Market Place for 30-year fixed-rate loans to borrowers with credit scores of 720 averaged 4.3 percent.

Where do you stand?